Regulatory: When should your company say “No” to seeking a TRO?

A motion for a temporary restraining order (TRO) is the familiar opening salvo for a trade secrets case. However, this approach may not be the right opening move for your company. The decision to seek a TRO requires careful consideration.

The most obvious benefit from immediately seeking a TRO is the opportunity to address and prevent imminent harm that the plaintiff may be facing. In trade secret litigation, the potential loss of customers and employees, as well as intangible injuries such as loss of good will, can be significant. When a plaintiff seeks to immediately stop the defendant’s misuse of trade secrets, as opposed to filing a regularly noticed motion for a preliminary injunction, these damaging effects can be greatly minimized. A TRO can also greatly enhance leverage for early settlement or at least an interim agreed injunction. A defendant may consent to limited injunctive relief to avoid the burden and expense of expedited litigation. Of course, a TRO can be a very intimidating display of litigation muscle, and the prospect of an early dramatic victory is a temptation the plaintiff may find hard to resist.

However, despite these benefits, there are also many potential drawbacks to such a strategy. The most obvious risk is that the plaintiff may begin its case with a loss. Winning a TRO is not easy; a TRO is by definition an extraordinary remedy appropriate only in limited circumstances. The dramatic opening to the litigation that the plaintiff imagines could easily become an embarrassing stumble.

Also, there are significant risks inherent in having to put forward the factual showing necessary for a TRO. The plaintiff must put forth evidence to show a high likelihood of success on the merits of the underlying claims, despite the fact that there has been no opportunity to conduct discovery in the case. In order to make the required factual showing, plaintiffs often rely on affidavits from employees and executives, and these affidavits may be drafted very quickly without sufficient time for a thorough investigation to confirm every fact stated. If, later in the litigation, it turns out that there were any errors in the plaintiff’s affidavits, the defendant may claim that plaintiff was trying to intentionally mislead the court, thereby bringing into question the merits of the entire litigation.

Even if plaintiff executes its initial strategy flawlessly, defendants will be provided with a full preview of plaintiff’s evidence in support of its claims, without having to similarly disclose defendants evidence that early in the litigation. This tactical imbalance can materially impact the entire course of the litigation.

Another potential pitfall arises when the court grants the requested TRO. Most jurisdictions require the plaintiff to post a bond as security in the event the court later determines that there was no reasonable basis for the temporary injunctive relief. Should the court determine that the defendant has suffered some tangible harm from the improper issuance of the TRO (i.e., loss of income), the defendant may be able to recover against the bond. Of course, by that point, the litigation may have so turned against plaintiff that the bond is only part of the plaintiff’s worries.

In a case where the plaintiff has concerns about seeking a TRO immediately upon filing, most of those concerns can be minimized by obtaining additional discovery to support the request for injunctive relief. Plaintiffs typically can obtain this additional discovery by seeking expedited discovery in anticipation of filing a motion for a preliminary injunction. This approach is of course a trade-off that requires balancing the harm that plaintiff faces by waiting to obtain injunctive relief.

In each new trade secret litigation, the plaintiff must carefully evaluate the available options based on the unique set of facts presented, the strength of the underlying case, and the potential damages that plaintiff may incur by not seeking immediate relief. The decision to seek a TRO at the outset of litigation, as opposed to waiting to seek injunctive relief after conducting discovery, is not always clear-cut and requires a full analysis of the potential benefits and drawbacks.